The hidden tax on trade: How corruption in Merchant Shipping Secretariat costs everyone

It is clear from the recent appearance that certain segments of the corrupt service providers who worked hand in glove with the previous regimes are trying the same method to influence the Government through the Merchant Shipping Secretariat to re-introduce anti-competitive practices. They are back at the door of the Ministry of Ports and Civil Aviation in Sri Lanka

By A Special Correspondent

When a regulatory body meant to police shipping lines and local logistics operations to ensure fair trade, prioritises vested interests over the very same fair trade, it acts as a bottleneck on the entire economy. In Sri Lanka, the Merchant Shipping Division (MSD) has frequently come under fire from industry groups for allowing powerful middlemen and intermediaries to bypass protective legislation to establish fair trade and transparency. When a licensing authority becomes compromised, it stops protecting the market and instead begins taxing it through institutionalised corruption. Exporters, importers, and everyday Sri Lankan consumers ultimately bear the cost of this compromised system which also affects foreign buyers/ investors and extends up to overseas customers.

Annually over 800 hundred licensing agents deal with one official for years to obtain a licence to operate and when that trust is compromised, money, foreign trips, and entertainment of different sort are given to facilitate vested interest of organised small groups promoted by the larger vested interest  to promote anti-competitive practices in Sri Lanka.

Exporters: The loss of global competitiveness

At a time when the  Export Development Board (EDB) Chairman and the Government of Sri Lanka are pushing for $ 36 billion exports, where Sri Lankan exporters currently operate in a cut-throat global market, these corrupt individuals at the border itself make products uncompetitive. Whether selling tea, rubber, apparel or any other export, their main edge is pricing. A corrupt licensing body destroys this advantage in two distinct ways:

• Surcharges and “parasite” middlemen: Legally, Sri Lankan regulations dictate an all-inclusive freight cost on import or export which is market driven, meaning local exporters should only be billed for agreed-upon contractual rates. However, corrupt oversight allows shipping agents and other local agents to slap on ad-hoc, illegal handling charges and documentation fees which is never questioned by the Merchant shipping secretariat.
• Pricing out local goods: Every extra dollar extorted by an intermediary is tacked on to the cost of production. When a Sri Lankan garment or tea bundle becomes artificially expensive due to domestic corruption, global buyers simply take their business to regional competitors like Bangladesh, India or Vietnam.

Importers: Supply chain delays and unfair levies

•  The abuse of delivery order (DO) fees: Importers face heavily manipulated and bloated delivery order fees in Colombo. Despite legal frameworks restricting out-of-pocket expenses beyond basic all-inclusive freight costs, regulatory negligence ensures that powerful shipping cartels can demand arbitrary clearance fees going up to Rs 100,000 only for a delivery order. Just to release a container after paying full freight in Colombo.

Merchant Shipping Division, instead of monitoring these practices that harm importers and exporters and the consumers, collude with middlemen to impose more charges and keep a blind eye to all the malpractices happening, including recent circulars promoting price fixing.

Importers are trapped in a system where regulatory corruption can hold them hostage by bureaucracy resulting in huge demurrage charges, creating an environment to pay massive fees to these middlemen completely out of their control, brought on by institutional inefficiencies such as the Merchant Shipping Division of the Ministry of Port and Civil Aviation.

The consumer: The ultimate payer of the “Corruption Tax”

The economic rule is simple: costs are always passed down. The consumer sits at the very end of the supply chain locally or internationally, bearing the brunt of the systemic decay.

•  Inflation on essential goods: Sri Lanka relies heavily on imports for basic items, from milk powder and pharmaceuticals to fuel and industrial raw materials. When an importer pays thousands of extra rupees in illegal local surcharges and bureaucratic bribes, they do not absorb that loss. They factor it into the wholesale cost. Same happens to the exporters who import raw material for production.
•  Artificial higher retail prices: By the time a product reaches a supermarket shelf in Colombo or a retail shop in Kandy, the price has been artificially inflated by the cascading costs of corruption. The average consumer effectively pays an invisible tax on every meal, medicine, and household item they buy, strictly to line the pockets of corrupt officials and maritime cartel middlemen.

The big picture: Economic isolation

A corrupt shipping licensing authority goes beyond draining bank accounts; it erodes institutional trust. If the international shipping community realise that regulatory enforcement is arbitrary or dictated by bribery, they will label Sri Lankan ports as high-risk zones.

The enforcement of transparent legislation like keeping freight rates strictly all-inclusive is vital. Without clean, strictly monitored regulatory bodies governing merchant shipping, Sri Lanka’s trade infrastructure will continue to serve a select few gatekeepers while the rest of the country pays the price.

The Minister: Political liabilities and loss of credibility

For a politician, a corrupt regulatory body under their purview is a ticking time bomb that threatens their career and reputation.

•  The “shielding cartels” label: If illegal shipping surcharges and unapproved local fees persist, the public and trade chambers naturally conclude that the minister is either dangerously incompetent or actively complicit. The minister becomes the public face of maritime cartels, absorbing the political damage for actions taken by bureaucratic gatekeepers.
• Every Government aims to improve its global standing. When corruption causes Sri Lanka’s ranking to drop on the World Bank’s Logistics Performance Index (LPI) or the Ease of Doing Business Index, the Head of State will hold the sector’s minister directly accountable for sabotaging national economic targets.

The Ministry: Institutional decay and policy paralysis

For the Ministry as an institution, corruption within its licensing arm causes operational rot that paralyses long-term development:

 Total breakdown of policy enforcement: The ministry may draft progressive policies such as mandate updates for all-inclusive freight rates or digital single-window clearing systems, but a corrupt authority will quietly block, delay, or misinterpret these directives. The ministry loses actual control over its own sector, surrendering the political authority.

Strict transparency and anti-corruption benchmarks are the promise of the NPP Government. A corrupt reputation can simply kill the country’s trading environment and investor confidence. For years the Merchant Shipping Division (Secretariat) of the ministry is left understaffed, controlled by compromised individuals who prioritise personal kickbacks over national logistics planning.

A broken chain of accountability

A corrupt Merchant Shipping Division (Secretariat) does not just rob businesses; it completely destabilises the governance structure above it. The ministry becomes functionally paralysed, while the minister bears the ultimate political cost. Until the ministry exercises aggressive, transparent oversight to dismantle these internal cartels, any attempt by the Government to position Sri Lanka as a transparent maritime hub will remain entirely out of reach.